SSNHZ Samsung Electronics Company Ltd (PK)

By Timothy W. Martin and Na-young Kim 

SEOUL--South Korea's Supreme Court struck down lower-court decisions for cases involving Samsung's de facto leader and the country's imprisoned ex-president, a ruling that exposes both to more jail time for a bribery scandal that shook the nation.

On Thursday, the country's highest court sent back to appeals courts the separate, though intertwined, cases of Lee Jae-yong, the 51-year-old grandson of Samsung's founder, and former President Park Geun-hye, 67, the conservative daughter of a past dictator. Both face a variety of charges, though the chief matter revolved around the Samsung scion's bribes to Ms. Park.

The new appeals trials for both individuals are expected to commence in the coming months. The 13 Supreme Court judges ruled unanimously on Ms. Park's case. The decision on Mr. Lee passed by a majority vote, with three justices dissenting.

The two cases are the most high-profile legal proceedings in an influence-peddling scandal that rocked South Korea, starting in late 2016. A populist backlash toppled Ms. Park's government.

The Supreme Court's decision injects new uncertainty over Mr. Lee's future. He is the final decision maker at Samsung, one of the world's largest business enterprises that spans dozens of affiliates including consumer electronics and theme parks. Without Mr. Lee's approval, key strategy moves and large acquisitions can't proceed.

Mr. Lee doesn't face immediate imprisonment. His fate will be determined by a forthcoming appeals trial that could reinstate, or even alter, his original five-year prison sentence. A previous appeals court ruling sprung him from prison after nearly a year behind bars, reducing his five-year sentence to a suspended sentence.

In the past, the appeals courts have tended to follow the guidance provided by the Supreme Court, said Chang Young-soo, a law professor at Korea University in Seoul.

"The possibility of Lee Jae-yong being imprisoned got much higher for now," Mr. Chang said.

In February 2018, an appeals court reduced his prison term to a suspended sentence after ruling that the bribes Mr. Lee was convicted of paying shouldn't include the cost of three horses Samsung provided to the daughter of a confidante of Ms. Park's.

The Supreme Court on Thursday disagreed with that viewpoint. Chief Justice Kim Myeong-soo said the original ruling, which considered the horses as bribes, was legitimate.

With the inclusion of the horses, Mr. Lee's bribes now add up to 8.6 billion South Korean won ($7.1 million)--a total surpassing a threshold that by law requires at least a five-year sentence, which can't be suspended. Mr. Lee's defense lawyers have sought to frame the bribes, in part, as the result of coercion.

Samsung, in a post-hearing statement, vowed to be a responsible corporate citizen and avoid repeating past mistakes. Mr. Lee has led the conglomerate since 2014 when his father, Samsung Chairman Lee Kun-hee, became incapacitated after suffering a stroke.

Neither the younger Mr. Lee nor Ms. Park attended the Thursday afternoon hearing, held in a packed courtroom in southern Seoul. Outside the court, protesters waved South Korean and American flags and shouted chants urging for Ms. Park's release.

The Supreme Court also sent back Ms. Park's bribery case to lower courts. She has been imprisoned for 2 1/2 years. A new appeals trial will reconsider whether an extra year should be added to her original prison sentence of 24 years, plus a fine that totals about $16.5 million. The court ruled on Thursday that the lower courts had sentenced Ms. Park improperly, by grouping charges together that should have been handled as individual incidents.

Ms. Park, who in 2013 became the country's first female leader, is one of four South Korean presidents to spend time behind bars. She has been found guilty on a variety of charges including bribery, disclosing state secrets and abuse of power.

The bribery scandal involving Ms. Park and Mr. Lee angered South Koreans who organized mass protests lasting for months. They railed against a system that had become all too familiar: the practice of corporations funding government initiatives and expecting positive treatment in return.

The suspected bribes flowed from the nation's biggest conglomerates into foundations controlled by a confidante of Ms. Park. The appeals court had tabulated Mr. Lee's bribes at 3.6 billion won. But that figure grew because the Supreme Court factored in the cost of the three horses, plus other sports-related payments made by Samsung.

The Supreme Court ruling focused on several meetings between Ms. Park and Mr. Lee starting in late 2014.

Mr. Lee needed government support--including a swing vote by the country's national pension--to seal a 2015 deal that would cement his grip on Samsung Electronics, prosecutors said. Two Samsung affiliates were merging, but foreign shareholders were vehemently opposed.

Suh Bo-hack, a law professor at Kyung Hee University in Seoul, applauded the Supreme Court decision for not being influenced, as in past trials of business tycoons, by the role Mr. Lee could have played in fortifying South Korea's economy at a challenging time. Seoul is grappling with new Tokyo trade restrictions, while a slowdown in global spending has hurt South Korea's export-heavy economy.

"The judges only focused on the rule of law and common sense," Mr. Suh said. "Today's ruling will be an ideal example for all future cases dealing with corruption between political and business elites."

Eun-Young Jeong and Andrew Jeong contributed to this article.

Write to Timothy W. Martin at timothy.martin@wsj.com

(END) Dow Jones Newswires

August 29, 2019 06:06 ET (10:06 GMT)

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